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Mobile Telephone

Hello

I have had a number of start up companies who due to having no credit rating, have had to get mobile telephone contracts in individual names. Most of them are insistent that the phones are used 100% for business purposes.

As I understand it, as this cannot be proved, the whole bill is taxable and subject to NI, unless there are any indentifiable calls above the monthly allowance which are business.

This seems harsh.  I am considering telling them that when the contract is renewed they should then transfer them to company names (i.e when they have credit), and if they fail to do they then should be subject to tax and NI

I know this is not technically correct but it appears to be fairer! Does anyone else go down this route or do they report them regardless?

Thanks in advance

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14th Jun 2012 16:42

I report. It may be harsh but it's the right thing to do. If clients came to me first before setting up their companies they wouldn't have this trouble. I don't buy the no credit rating excuse. Why don't they pay up front?

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14th Jun 2012 19:11

Surely by not reporting, deliberately so, you are running the risk of having to pay penalties to HMRC for having incorrectly completed the P11D.  I would not wish to take such a risk and would always report. 

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Two phones?

One for personal and one for business (purchased just after the company was set up?) would be the only way that I could see you being able to argue this.

 

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By twj4789
14th Jun 2012 21:06

Not reporting
We have some clients with similar problems. HMRC states that one mobile phone can be provided incurring no taxable liability. There can be an amount of personal usage on this however it should predominantly be used for business.

We will not put the phone down as P11D if the client pays the bill from their business bank account. It they are paying from their personal account then it is a personal expense.

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14th Jun 2012 21:19

"HMRC states that one mobile

"HMRC states that one mobile phone can be provided incurring no taxable liability. There can be an amount of personal usage on this however it should predominantly be used for business."

Is this what you have read?

http://www.hmrc.gov.uk/paye/exb/a-z/t/telephones-mobile.htm#1

 

Definitions or restrictions

You make one mobile phone (or SIM card) available for use to an employee. The phone can be used for both business and private calls. The contract is between you and the mobile phone operator.

The same rules apply whether you pay for rental charges, business calls and/or private calls.

What to report, what to pay

You have:

no reporting requirementsno tax or NICs to pay

It says the contract is between you (the employer, in this case the limited company) and the mobile phone operator. This isn't the situation that the OP describes.

 

This is the situation you are referring to and it clearly states that it should be reported on the P11D:

 

 

Employee's own mobile - you pay the supplier directlyDefinitions or restrictions

You cover the costs of an employee’s mobile phone by paying the phone company directly. The contract for the phone is between the employee and the mobile phone company.

What to report, what to pay

For employees earning less than a rate of £8,500 per year, unless the exception outlined below applies:

report on form P9D - section A(2)add the value of the benefit to the employee's other earnings when deducting and paying Class 1 NICs (but not PAYE tax) through your payroll

For company directors or employees earning at a rate of £8,500 or more per year, unless the exception outlined below applies:

report on form P11D - section Badd the value of the benefit to the employee’s other earnings when deducting and paying Class 1 NICs (but not PAYE tax) through your payrollWork out the value to use

For employees earning less than a rate of £8,500 per year:

if you pay no more than the employee’s monthly tariff, then the value to use for both P9D and Class 1 NICs purposes is the full amount you pay to the phone companyif you pay any private call charges that aren’t covered by the employee’s monthly tariff, then this amount should also be included for P9D and Class 1 NICs purposesif you pay any business call charges that aren’t covered by the employee’s monthly tariff, then you can disregard them for Class 1 NICs purposes but you should report them on form P9D unless you have a dispensation covering these amounts

For company directors or employees earning at a rate of £8,500 or more per year:

if you pay no more than the employee’s monthly tariff, then the value to use for both P11D and Class 1 NICs purposes is the full amount you pay to the phone companyif you pay any private call charges that aren’t covered by the employee’s monthly tariff, then this amount should also be included for P11D and Class 1 NICs purposesif you pay any business call charges that aren’t covered by the employee’s monthly tariff, then you can disregard them for Class 1 NICs purposes but you should report them on form P11D unless you have a dispensation covering these amountsExceptions

If the employee’s phone is acquired for business purposes and is only used for business calls, then the following rules apply.

For employees earning less than a rate of £8,500 per year, you have:

no reporting requirementsno tax or NICs to pay

For company directors or employees earning at a rate of £8,500 or more per year:

report on form P11D - section N - unless you have a dispensation for this itemyou have no tax or NICs to pay

 

 

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